Three Rate Structure Proposed for India’s Goods and Services Tax

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Jul. 22 – A three-rate structure for the India Goods and Services Tax was proposed by Finance Minister Pranab Mukherjee yesterday as a way of streamlining implementation.

Under his proposal, there will be a 20 percent levy on goods, 16 percent on services and 12 percent on essential items. The GST in India is scheduled for April 1, 2011 with the intent of combining all central and state taxes into one.

This will also allow India’s GST revenue to be divided equally among the national and local governments. Mukherjee is also proposing a decreased 12 percent tax rate for essential items.

“The peak effective rate will be about 15 percent which will be quite acceptable to the trade and industry,” said Mukherjee, while explaining the dual rate structure for goods during the state finance ministers meeting held yesterday.

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